Financial Regulatory Update 2016 – Exchange Control

Measures towards a continuing of the liberalization of The Bahamas’ exchange control regime took effect April 20161. The latest step in the liberalization process relates to transactions on both the capital account (investments and borrowing) and the current account (trade) transactions.

The current account items, in particular, involve increased delegated authority for commercial banks and Money Transmission Businesses (“MTBs”), in respect of imports, education-related remittances, small gifts to non-residents and transfers outside The Bahamas by work permit holders. On the capital side, areas affected include investments abroad, and borrowing inside The Bahamas by temporary residents and work permit holders.

Under delegated authority, commercial banks and MTBs are able to approve certain applications to purchase foreign currency, within specified dollar limits, without prior reference to the Central Bank of The Bahamas (“CBB”), once customers provide evidence of the external obligation or need. In the absence of delegation, sales of foreign exchange may only be accommodated after the approval from the CBB has been provided.

This is Delaney Partners’ update to clients arising out of the recent announcement.

A.ADJUSTMENTS TO PRESENTLY DELEGATED CURRENT ACCOUNT ITEMS

Transaction

Changes

1

Gift remittances to non-resident individuals, church or charitable organizations

·Increased from $1,000 to $5,000 per transaction. Approval for gift amounts in excess of this amount will require application to the CBB.

·Such companies and/or individuals with the requisite licenses may go directly to commercial banks to convert up to $5,000 per transaction in respect of non-oil imports where payment is to be made to an individual.

3

Temporary residents remittances abroad

·Temporary Residents for Exchange Control purposes (e.g. work permit holders), paid in Bahamian dollars, may transfer salaries abroad without reference to the CBB2.

·Such individuals may borrow in Bahamian dollars, without limit, without reference to the CBB, to finance owner-occupied homes. Borrowing by such individuals for investment purposes will still require prior CBB approval.

2

Temporary residents borrowing to finance owner-occupied homes

·Such individuals, if they have resided and worked in The Bahamas for at least 3 years, may borrow up to B$400,000 without reference to the CBB. Where the residency requirement is not met, reference must be made to the CBB.

3

Direct (i.e. non-portfolio) “Special Criterion” investments both in The Bahamas’ offshore sector as well as abroad by residents for exchange control purposes

·Increased from $1 million per person or entity via the official market with an overall limit of $5 million per investor group, per transaction to $2 million per person with an overall limit of $10 million. The facility requires the prior approval of the CBB and may be accessed once every 3 years. Qualification as a “Special Criterion”3 investment is at the discretion of the CBB. Portfolio investments do not qualify as “Special Criterion” investments.